You win a lottery of Rs.1,000,000/-, you have a choice between spending the money now or putting it in a bank account for 5 years that pays you 5% per annum. Calculate the opportunity cost of spending money now?

Explain why the total benefits to the local economy are higher when we use the simple spending multiplier.  Specifically, what are we assuming about this city when we calculate benefits using the simple spending multiplier formula?

If the MPC = 0.9, MPI = 0.1 and if investment spending increases by $200, the level of income or real GDP will be _____.

Assume that potential real GDP is $300 and equilibrium real GDP is 150 the spending multiplier equals 5. What is the recessionary gap?

The US decided to spend it's way out of the recession and England decided to cut spending. Compare and contrast the two ways to deal with the recession: austerity or spending, reducing interest rates and QE. Has there been a difference in GDP growth?

Using a carefully drawn Phillips Curve, explain what's going on with the US economy since COVID-19 an the US lockdown. Remember that as unemployment rates increased, consumer spending decreased, and deflation incurred as consumer spending greatly decreased.

The Council of Economic Advisers requests that you carefully describe and explain at least two long-run macro policy options that the President can consider to boost productivity growth and potential GDP. These policies should be aimed at raising potential GDP and shifting the Long Run Aggregate Supply curve (LRAS) out over time. The administration is considering several policies that could boost productivity over the long run. These policies include massive infrastructure spending, various tax breaks, as well as policies that could bring manufacturing activity back to the United States. Describe how the policies that you propose will affect real GDP. Recall that GDP = Consumption Spending + Investment Spending + Government Spending + Trade Balance (Exports – Imports)

(PLEASE DO NOT ANSWER IN HANDWRITING)

1 What is the main variable that influences consumer spending? If income rises by $100 billion, causing consumption to increase by $85 billion, calculate the MPC (or marginal propensity to consume).

2 Besides an increase in income, what are two more major factors that could cause consumer spending to increase?

3 What are two major factors that could cause investment spending to increase?

4 What are two factors that could lead to an increase in the trade deficit? (Note that I want more than a change in exports and imports; I want factors that would cause these to change.)

5 Suppose that investment spending rises by $500 billion with an MPC of .75. Calculate the change in GDP.

6 Suppose that exports fall by $150 billion with an MPC of .7. Calculate the change in GDP.

Fixed Overhead Spending and Volume Variances, Columnar and Formula Approaches

Branch Company provided the following information:

Required

Enter amounts as positive numbers and select Favorable (F) or Unfavorable(U).

1. Using the columnar approach, calculate the fixed overhead spending and volume variances.

2. Using the formula approach, calculate the fixed overhead spending variance.

$  

3. Using the formula approach, calculate the fixed overhead volume variance.

$  

4. Calculate the total fixed overhead variance.

$  

QUESTION 7

1. Who is responsible for implementing fiscal policy? Check all that apply.

   		Mayor
   		Congress
   		President
   		Federal Reserve Chairperson

QUESTION 8

1. If an economy has a high inflation that is negatively affecting the country, how could fiscal policy be used to combat this? Check all possible correct answers.

   		Cut taxes.
   		Raise taxes.
   		Cut government spending.
   		Raise government spending.
   		Cut interest rates.
   		Raise interest rates.

QUESTION 9

1. Suppose an economy is experiencing very high unemployment. How could each tool of fiscal policy be used to combat this problem? Check all possible correct answers.

   		Cut taxes.
   		Raise taxes.
   		Cut government spending.
   		Raise government spending.
   		Cut interest rates.
   		Raise interest rates.

Which of the following is true of the multiplier: A) It is larger or higher than 1 when unemployment is below the natural rate of unemployment. That is government is spending increases or tax decreases have less effect when the economy is doing well. B) It is smaller or below 1 when unemployment is below the natural rate of unemployment. That is government spending increases or tax decreases have less effect when the economy is doing well. C) It is larger or higher than 1 when unemployment is below the natural rate of unemployment. That is government spending increases or tax decreases have less effect when the economy is doing worse. D) It is below or less than 1 when unemployment is below the natural rate of unemployment. That is government spending increases or tax decreases have greater effect when the economy is doing well.